Getting your business fighting fit for 2021
Craig Horsfall, Partner at Haines Watts, discusses the business critical considerations SMEs need to look at when planning for the year ahead.
So far, the new year has presented a variety of challenges for business owners. Nationally, trade has fallen as a result of the third lockdown, the number of furloughed employees has substantially increased, and the implications of Brexit have caused disruption to many supply chains - and all of this within a matter of weeks.
With uncertainty still in the air, forward planning is a must. From streamlining your operations to unlocking trapped cash, I’ve outlined some of the key considerations business owners should have front of mind when getting 2021-ready.
Understand your cashflow
In 2021, cash remains king. With nearly a third of businesses having less than 3 months of cash reserves left, it is critical to understand and stay in control of your numbers.
Creating and maintaining a robust cashflow forecast will paint a clear picture of when/where your money is coming in from and going out to. Ideally, you should have a rolling quarterly forecast as well as a ‘what if’ series of options. Accounting systems like Xero provide you with a real-time view of your numbers whilst enabling you to make accurate projections and forecasts.
Having foresight is key, and reviewing your forecasts regularly will improve your ability to plan.
Unlock trapped cash
Last year the CBI reported that over two thirds of businesses felt they had not fully explored every area of support available to them. Beyond the Government’s Covid support measures for businesses, there are a range of tax incentives and reliefs you need to be aware of.
R&D relief, capital allowances and creative industry tax reliefs are all valuable incentives that could significantly reduce your corporation tax bill, or even generate a cash refund if you qualify. Last year we helped businesses unlock over £50 million in tax relief, providing a lifeline to many who were struggling with cash.
The Government also recently extended the Annual Investment Allowance cap to January 2022. This is great news if you’re considering investing in plant and machinery, meaning you may be eligible to claim up to £1m in same-year tax relief.
Streamline your operations
Many businesses have reinvented the way they operate in the wake of the pandemic, and agile working is very much the new normal.
Cloud accounting presents a smart opportunity to transform your financial monitoring and reporting, whilst streamlining processes, keeping overheads down and helping you meet the challenges of running and growing a business. It should be a priority if you want to unlock the real potential of your business.
Outsourcing all or part of your finance function can free you from the distraction of day-to-day accounting matters, enabling you to concentrate on the aspects of your business that drive sales, service, and profitability.
Importing or exporting? Know where you stand with Brexit
The post-Brexit transition period has been causing a headache for many, with a quarter of international traders having stated that disruption at the borders has affected their ability to import goods.
If you’re importing or exporting goods, knowing where you stand with Brexit is essential. Even though the trade deal removed tariffs on UK/EU goods, tariffs are still due on non-UK or EU goods. Stories of businesses and consumers being hit with surprise charges have been rife since the post-Brexit rules came into play at the start of January – consider the impact of this on cashflow, profit and customer experience.
To avoid being hit by an unexpected VAT bill, knowing the origin of your products and your supply chains is essential.
Legislative changes are just around the corner
Having been delayed last year, IR35 and Domestic Reverse Charge are both due to come into play in a matter of weeks. Staying compliant is key and getting it wrong could be very damaging to your business.
If you’re self-employed or working in the construction industry, these changes could impact you. Make sure you’re reviewing your contracting arrangements now to see whether you will be impacted.
As a starting point, HMRC have an online tool to assess whether you’ll be impacted by IR35.
Be ready for any potential tax changes too…
A potential rise in tax rates could be on the horizon. There’s been a lot of focus on Inheritance Tax and Capital Gains Tax – the latter of which was subject to an OTS report which recommended doubling the rate in line with income tax.
Now is not the time to panic and rush a sale, but instead to plan ahead. Looking at your finances now and knowing your options can place you in a much more resilient position.
The Chancellors next Budget is 3rd March, so we’ll likely find out about any changes then. In the meantime, speak to an expert.
Find the right advisor
All of these matters can become very complicated, very quickly. If you’re struggling with any of the issues above, it would be a safe bet to consult an expert.
Finding the right advisor for you and your business could be the difference between thriving or flatlining in 2021.
How can we help?
When it comes to mapping out 2021, the road ahead might seem uncertain or even daunting, but you don’t have to go it alone.
Whether you’re navigating Brexit, looking to unlock trapped cash or you just want commercial advice that cuts through the noise, we offer a holistic approach to all your business matters, taking the time to understand you and your business aspirations.
We’re on hand to support you through 2021 and beyond. Find out more about how we could support you.
This was posted in Bdaily's Members' News section by Haines Watts .
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